- First, the way the pockets were labeled did not fit my specific personal finance needs.
- In other words, since I was not able to customize my filing system to make it logical and Jacob-user friendly, I was very unmotivated to follow it.
- Second, the flap that comes over the pockets to protect them and keep things from falling out was a hindrance to having quick access to my files.
Regardless of my excuses for not having a good financial system, I realized when I was reading David’s book that I needed to start over and follow a new organizational mantra.
Using the guidance in Bach’s book, I was able to create a user-friendly and effective financial organization system of which the setup I will describe below. To follow along with me, click on the link below, print yourself out a copy of the two page excerpt, and read on!
Note: In this post, I will give a quick summary of each file folder category and/or comment on the contents that I place in them. To read the complete details of how to set up the system, click on the link above.
Creating David Bach’s Effective Financial Organization System
- Go to the office supply store and purchase 25 hanging folders, a cardboard box in which to hang them, and 50 manilla file folders to place inside of the hanging folders.
- Label 13 hanging folders, as described below:
- Tax returns – In this folder, place 7 manilla file folders – one for the tax returns and tax documents for each of the last 7 years. Since charitable contributions are included as a line item on my tax returns, I place my donation reciepts in this file as well.
- Retirement accounts – In this folder, place 1 file folder for each of your retirement accounts (IRAs or 401k).
- Social Security – In this folder, you should place your most recent Social Security Benefits Statement. Refer to the following link for more information – My Money Blog – Discover Your Future Social Security Benefits
- Investment accounts – In this folder, place 1 file folder for each of your non-retirement investment accounts (stocks, bonds, ETFs, mutual funds, etc)
- Savings and checking accounts – In this folder, include a separate file folder for each of your savings or checking accounts
- Household accounts – In this folder, include separate file folders labeled as follows – “house title,” “home improvements,” and “home mortgage.” In addition, I found it useful to include a separate file folder for each of the 2 apartments I have lived in in the past 2 years.
- Credit card DEBT – In this folder, include separate file folders for each of the credit cards you have.
- Other liabilities – This folder would contain subfolders for all other liabilities that are not housing or credit card related. For me, I also created a subfolder for the personal loan I took out in college to help build credit. For more information on that topic, click on the following link – My Money Blog – Build Your Credit Score From Nothing.
- Insurance – This folder should contain separate folders for each of your different insurance accounts.
- Family will or trust – This folder should contain the most recent copy of your will that you create with your lawyer (not by yourself).
- Children’s accounts
- FinishRich inventory planner – This folder should contain each of your semi-annual updated versions of the Financial Inventory Sheet (shown at the link below) to keep track of your net worth. I also keep the historical and most recent copies of the worksheet (at the 2nd link below) that helps you track where your money is going.
- Career/Jobs – This hanging folder is not included in David Bach’s system. In this folder, I created a separate file folder for each of the jobs I have held. In them, I place paystub information and various additional job-related information I want to hang on to.
Well, it’s that simple! You have now created a powerful, custom-built financial organization system that you will be more likely to use than any other (because, hey, you created it). As you get new statements in periodically, simply place them in the appropriate file, and it will make producing historical records a breeze!
This is just one of the very powerful messages in David Bach’s book, “Smart Couples Finish Rich.” I would highly recommend that you purchase a copy for yourself and read it cover to cover several times. More posts to come soon on my numerous learnings from it!